CANADA FX DEBT-C$ stabilizes for a second day as oil rises

* Canadian dollar at C$1.3151, or 76.04 U.S. cents
* Bond prices higher across flatter maturity curve
TORONTO, Aug 9 (Reuters) - The commodity-linked Canadian
dollar traded in a narrow range for a second straight day
against its U.S. counterpart on Tuesday as higher oil prices
offset recent weak domestic data.
Oil rose as forecasts for a drop in U.S. inventories and
speculation of producer action to prop up prices countered
concern about a supply glut. U.S. crude prices were up
0.60 percent to $43.28 a barrel.
The Canadian dollar's more stable performance follows steep
losses on Friday as a slump in domestic jobs and a record-wide
trade deficit contrasted with a robust U.S. jobs report.
The implied probability of a Bank of Canada rate cut has
increased to 19 percent, overnight index swaps data showed, from
just 12 percent before Friday's weak domestic data.
However, technical support for the Canadian dollar at
C$1.3219 may continue to limit losses for the currency over the
short term as oil is poised to extend gains toward $44.65,
according to a research note from RBC Capital Markets on
Tuesday.
At 9:26 a.m. EDT (1326 GMT), the Canadian dollar
was trading at C$1.3151 to the greenback, or 76.04 U.S. cents,
slightly stronger than Monday's close of C$1.3163, or 75.97 U.S.
cents.
The currency's strongest level of the session was C$1.3145,
while its weakest was C$1.3190.
Canadian housing starts fell in July from June, as
construction of multiple units - typically condos - fell 13.3
percent after an unexpectedly large gain in June, data from the
national housing agency showed on Tuesday.
Canadian government bond prices were higher across a flatter
maturity curve. The two-year bond rose 0.5 Canadian
cent to yield 0.508 percent and the benchmark 10-year
climbed 26 Canadian cents to yield 1.038 percent.
The yield on Canada's 10-year bond fell 1.8 basis points
farther below the yield on its U.S. equivalent, leaving the
spread at -53.8 basis points, its largest gap since June 2, as
Canadian government bonds outperformed.
(Reporting by Fergal Smith; Editing by Bill Trott)